Daijiworld Media Network - Mumbai (SHP)

Mumbai, Mar 16: With the Sensex and Nifty tanking amid the coronavirus impact, RBI sprung into action and called in an emergency meeting on March 16 at 4 pm. The domestic stock markets on Monday dived deeper as both benchmark equity indices nosedived in afternoon trade.

At around 02:40 pm, Sensex was down by 2,397.87 points or over seven per cent at 31,705.61 while Nifty slid by 662.00 points or 6.65 per cent to 9,293.20.

This drop in the indices has rattled the market. The Indian stock markets are crashing despite the global stimulus coming from central banks around the world. Investor sentiment, according to many brokerages on D-Street, is down and unlikely to be revived by a rate cut.

However, one of the speculations is high that the Reserve Bank of India (RBI) may cut rates at the meeting. Although analysts believe that the rate cut will not prove worthwhile to the economy, it could, however, provide notional confidence to investors.

If RBI cuts rates today, this will be the first inter-meeting interest rate cut since the RBI's monetary policy committee was instituted in February 2016.

The presser comes after many called for a rate cut following similar steps being taken by the world's leading central banks.

Meanwhile, the US Federal Reserve has been slashing the policy rates to near-zero levels in a span of 10 days. Following suit, the Bank of England slashed the rates by 50 basis points, and so did the European Central Bank. In an email, the RBI said that 'Governor Shaktikanata Das will meet the press at 4 pm today (Monday).'

Market analysts have constantly highlighted that the RBI has enough room to cut rates to the tune of 65 bps by June. Some like Barclays and BofA have also spoken about the likelihood of an inter-meeting cut (before the April 3 policy meeting).

Between February and October 2019, the RBI had cut the policy rates by a cumulative 135 bps to a nine-year low of 5.15 per cent.

Since the coronavirus outbreak that began in China in mid-November last year, over 6,000 people have been killed, most of them being the Chinese. However, with an aggressive approach, the country managed to bring down new cases to a single digit. Unfortunately, Europe has now become epicentre with Italy and Spain being the worst-hit, forcing both the nations to go on complete lock-down.

If the pandemic is not contained analysts are predicting disastrous situation for several economies.